Topic: [2015-06-24] WSJ: Bitcoin Success Hinges on CIOs Embracing Open Platforms, APIs (Read 484 times)

Bitcoin Success Hinges on CIOs Embracing Open Platforms, APIs

CIOs investigating bitcoin and other digital currencies must consider how willing they are to embrace a more open IT architecture, as well as a growing number of service providers, says a security chief at one bitcoin startup.

“It comes down to understanding and embracing more of an open source mentality when it comes to software, and really going to more of a service-oriented architecture that looks to utilize a lot more APIs and plug into a lot of different pieces,” said William Dennings, security chief at bitcoin startup Bitreserve. APIs, short for application program interfaces, are a set of tools that allow applications to communicate and share data with one another.

Incorporating bitcoin requires taking an increasingly service-oriented approach to network architecture in which a number of different applications talk to and provide services to each other. That open architecture has been a critical enabler of cloud computing and the broader “as-a-service” marketplace. Many bitcoin services are cloud-based and rely on open source technologies. Bitcoin’s core software is open source and copyright free, meaning anyone can suggest improvements or create applications around it.

Bitcoin is gaining some traction in the enterprise, as some organizations embed it in payroll systems or financial reporting tools. Financial institutions like Bank of New York Mellon Corp. and UBS AG are exploring bitcoin’s blockchain technology, the online ledger that records the identities of bitcoins and who holds them, and how it could impact financial transactions.

But the architecture underpinning the digital technology has posed challenges. One senior developer at BNY Mellon told CIO Journal his biggest challenge was getting used to bitcoin’s peer-to-peer architecture. BNY Mellon’s systems are largely built on client-server architecture, in which a central server delegates tasks and resources to a network of computers. Bitcoin uses a decentralized model in which each computer can be a server for others and allows shared access to files and peripherals.

Another challenge for CIOs will be figuring out how bitcoin platforms and services operate with existing systems like those from SAP SE and Oracle Corp., at least until bitcoin gains widespread adoption. “As it becomes a more common currency you’ll start to see those other companies incorporate it into their product offerings,” said Mr. Dennings, who was security chief at Nike Inc. and MasterCard Inc. before joining Bitreserve.

Security will remain a key sticking point for IT and security chiefs inside big companies, he added. That means CIOs will need a deep understanding of bitcoin technology’s inner workings and how to mesh the new technology with existing regulations.

Many cryptocurrencies are seen as risky because they lack backing from a central institution, like a bank. Security concerns also arise since bitcoin is often stored online and susceptible to breaches. Like any transaction network, bitcoin isn’t impenetrable.

As companies allow vendors and service providers to manage these processes, contracts and service-level agreements likely will need more attention to clearly articulate things like data security measures and system uptime requirements, Mr. Dennings said.

CIOs are spending about $90 million on bitcoin solutions on behalf of their companies or business partners, said Will Jan, vice president and lead analyst at Outsell Inc. Those solutions include both hardware, like bitcoin ATMs, and software. Mr. Jan said he expects that figure to reach about $230 million by 2018.

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Source: http://blogs.wsj.com/cio/2015/06/24/bitcoin-success-hinges-on-cios-embracing-open-platforms-apis/